The auction of PDV Holding Inc., the parent company of Citgo Petroleum Corporation, has become one of the most complex and sensitive legal processes linked to Venezuela’s economic collapse and its external debt. Citgo, a leading oil refinery in the United States, was the most valuable asset outside the country that the Venezuelan state owned through PDVSA. However, chaotic nationalizations and widespread defaults led to a series of lawsuits that have fueled a lengthy judicial process in U.S. courts since 2017.
The Preliminary Winning Bid: Dalinar Energy / Gold Reserve
The group led by Gold Reserve Inc., through its subsidiary Dalinar Energy Corporation, has been designated as the preliminary winner of the auction with a bid of $7.38 billion, far exceeding the base offer of $3.7 billion proposed by Red Tree Investments (part of Contrarian Funds).
Despite the cash portion of Dalinar’s bid being lower than its competitors’, its main appeal lies in covering 11 of the 15 creditors who have litigated against Venezuela. Major names among these include:
ConocoPhillips
Rusoro
Crystallex
Koch Industries
OI Glass
Siemens
The bid includes a combination of debt and equity financing, backed by JP Morgan Chase, TD Bank, and Sumitomo Mitsui Banking Corp.
Distribution of Compensations and Exclusions
If approved, the bid would allow for almost all claims of the main creditors to be paid. Gold Reserve, whose subsidiary is leading the proposal, has a claim of $1.18 billion due to the expropriation of its mining assets in Venezuela, which would be directly compensated from the sale proceeds.
However, a key group has been excluded from the agreement: the holders of the 2020 PDVSA bond, whose debt is secured by Citgo shares as collateral. The lack of an agreement with this group introduces additional legal risk and could delay the final distribution of funds, as the litigation over that debt continues in a New York court.
A Final Minute Bid Battle
During the final stages of the process, bids emerged that exceeded even $8 billion and $10 billion:
Vitol, a commodity trading house, submitted a bid of over $10 billion.
Black Lion Capital Advisors offered $8 billion in cash.
Elliott Investment Management, which won an earlier round, presented a $7.3 billion bid, but creditors rejected it due to its conditional nature.
However, many of these bids did not meet the court’s established requirements, leaving Dalinar/Gold Reserve as the most solid proposal in legal and financial terms.
Pending Approval from the U.S. Treasury
Although Judge Leonard Stark of the Delaware Court must officially validate the sale in a final hearing on August 18, the process also requires approval from the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury, given that Citgo is protected by sanctions imposed on Venezuela.
OFAC has extended its protection over Citgo until December but refused to provide clear guidance on the sale in April, creating uncertainty over whether it will actually permit the transfer to proceed.
The CITGO auction is particularly complicated because PDVH faces bondholders whom it accuses of misrepresenting their rights in the process.
The CITGO auction marks a judicial milestone in the Venezuelan crisis. Gold Reserve is leading with a multimillion-dollar bid that could resolve much of the claims of international creditors, but it still depends on the go-ahead from the U.S. Treasury.
subasta CITGO
PDV Holding
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trial in Delaware
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expropriations Venezuela
Crystallex
ConocoPhillips
PDVSA 2020 bond
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U.S. sanctions Venezuela